Bloomberg.com: Shell Says SEC Starts Formal Probe of Reserves Cut
Feb. 19 (Bloomberg) -- Royal Dutch/Shell Group, Europe's second-largest oil and gas producer, said the U.S. Securities and Exchange Commission began a formal investigation into the company's decision to cut its estimate of oil and gas reserves.
``The SEC has now advised Shell's legal representatives that its enquiry would proceed as a formal non-public investigation,'' Shell said in a statement on PR Newswire. ``Shell will continue to cooperate fully with the SEC's investigation.''
Shell, based in London and The Hague, on Jan. 9 said its proved oil and gas reserves, a measure of the company's value, in 2002 were 20 percent less than previously stated. The announcement triggered the biggest one-day drop in Shell's shares since July 2002, as well as investor criticism of Chairman Philip Watts.
A formal SEC probe requires a vote of the commissioners and empowers investigators to issue subpoenas for documents or to compel witness testimony. John Heine, an SEC spokesman in Washington, on Jan. 13 said an investigation was possible.
Shares of Shell Transport & Trading Co. in London, which represents 40 percent of the Shell group, were up 1.5 pence, or 0.4 percent, at 352 pence as of 2:39 p.m. in London. The stock earlier rose as much as 0.7 percent.
The changes in Shell's reserves eliminated an amount equal to 3.9 billion barrels of crude oil, or 13 percent of known U.S. oil deposits, from the company's accounts. No wrongdoing was involved in the earlier estimates, Shell has said.
The revision was partly connected to an A$11 billion ($8.6 billion) Australian project called Gorgon. Shell had recognized reserves from the project since 1997, before the venture's partners, ChevronTexaco Corp. and Exxon Mobil Corp., made the final decision to proceed.
The SEC requires signed sales contracts, approved authorizations for expenditures, environmental permits and other documents in ``developing frontier areas,'' according to ``Clarification of Oil and Gas Reserve Definitions and Requirements'' the SEC published in July 2000 on its Web site.
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Last Updated: February 19, 2004 09:41 EST